A couple of weeks ago, Jessica Rodgers of DLA spoke on the topic of SEC due diligence demands for service providers at a webinar cohosted by MyComplianceOffice and DLA. You can view recordings of the webinar and download the slides here.
During the webinar and in the time that followed the event, Jessica received a number of follow up questions that primarily centered on the practical question of, “So now that I know what I’m supposed to do, how do I overcome the hurdles to actually get this process off the ground?” In this three part series Jessica will break this question down and address the three most common obstacles that her clients encounter when they first try implementing a critical service provider review program.
Hurdle 2) - Getting the Service Providers to Respond
Getting the Service Providers to Respond – Unfortunately, it’s not enough to select service providers, draft up questionnaires and send them out-- you actually need to get them back. This is where it is important to designate an individual with the responsibility of sending out the questionnaires and tracking the responses. Make sure that this person is following up with the service providers at regular, frequent (i.e. weekly) intervals to get a response. You also want to make sure you review the surveys and the supporting documentation promptly so that if there are any gaps or missing items, you can inquire about them while everything is still fresh and you have the vendor’s attention. It is also important to emphasize the value the firm is placing on obtaining this information from its service providers. If the person tasked with this is met with any real push back or resistance, this is where the CCO should step in.
Another thing to keep in mind is that you want to make sure that the surveys are getting into the right hands at the service provider of someone who can help—it may not be your day-to-day contact who has all the information you are requesting. And on this subject, we believe that as this becomes increasingly a routine practice for investment adviser compliance programs, vendors will become more accustomed to the information requested and will be more prepared. One listener from our webinar indicated that her custodian already had most of the documents we recommend asking for posted on their website.
One last point on this subject, when determining where to put this review on your firm’s compliance calendar, think about the ebb and flow of your firm’s business throughout the year. We had one client who struggled to get completed surveys back from both the service providers and internal employees for months when the review was launched in the busy spring season. The following year, the review was moved to the slower, summer months and all of the surveys were returned within a few weeks.
This is the second post in our three-part series titled “Overcoming the Vendor Due Diligence Hurdles". Subscribe to get notified of part 3, "Selecting the Right Vendors".
Content written by: Jessica Rodgers of DLA
DLA provides internal audit, forensic accounting, litigation support, compliance and advisory services to over 200 public and private companies in a wide-variety of industries. The compliance team has in-depth experience with financial firms, including broker-dealers, registered investment advisors, hedge funds and private equity funds. Our scope of services range from developing and implementing compliance programs, risk assessment and testing, including annual reviews and mock audits to ongoing advisory and monitoring.
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